Setting timeline makes tax season less painful

Does the mention of April 15 make you shudder? Do you avoid that shoebox full of receipts, W-2 forms and interest statements until the last minute?

Income-tax time doesn’t have to be a nightmare. If you start preparing ahead of time and stick to a set schedule for organizing and filling out your paperwork, you’ll find that April 15 doesn’t have to be a day of dread.

By Dan Rafter

Does the mention of April 15 make you shudder? Do you avoid that shoebox full of receipts, W-2 forms and interest statements until the last minute?

Income-tax time doesn’t have to be a nightmare. If you start preparing ahead of time and stick to a set schedule for organizing and filling out your paperwork, you’ll find that April 15 doesn’t have to be a day of dread.

Here’s some advice on getting your taxes done on time and with the least amount of stress.

Mid-February

This is the time to decide whether you will file your taxes on your own, with the help of a professional or by using tax software. If you run your own business or need to itemize your expenses, you might consider working with a tax specialist. This professional might be able to save you significant dollars.

Early March

Now’s the time to begin organizing the documents you need to prepare your taxes. These include the W-2 forms sent from your employers, the statements sent by your banks and the tax statements provided by your mutual funds and other investments. You should also find the statements sent to you by your mortgage company. These all contain information that must be entered on your tax forms.

Mid-March

At this point, you should decide what tax form you’ll be filling out. The 1040 EZ form, the simplest version, can be used if you are single or are married and filing jointly, and if your taxable income is less than $50,000. There are some limitations to this form: It does not allow any itemized deductions, and you can’t use if your income from investments totals more than $400. If you qualify for the 1040 EZ form, you can also file with the 1040 A form if you’d like to include IRA deductions. If you don’t qualify for the EZ form, you must use the 1040 form.

Late March/Early April

You’re now ready to start filling out your tax forms. If you’ve taken the time to organize your paperwork before this point, the process should go smoothly. Remember, though, that the more complicated your taxes, the more likely you’ll make costly mistakes. It might make sense to work with a tax professional. If you need simpler answers, visit the IRS online at www.irs.gov. You’d much rather visit with them this way than meet their agents for an audit.

Before April 15

Make sure you send your taxes on or before April 15. Sending taxes earlier is beneficial if you are expecting a big refund. If you’re not, filing early matters less.

Sources: IRS.gov, MsMoney.com

SIDEBAR

Tips for lowering your tax bill

You don’t want to pay more in income taxes than absolutely required. Here are some tips, from SmartMoney.com, for cutting that bill.

-- Sell investments that are losing money. It makes no sense to hold on to investments that are costing you dollars. Report the loss on your tax statements after you sell.

-- Don’t forget charities. It’s the right thing to do, but making charitable donations also pays off in the form of deductions during tax time.

-- Pay deductible expenses early. For example, by paying a January mortgage bill in December you’ve made one extra payment for the year. That results in a bigger deduction.